Redflex plunges 31pc after bid rejected

Redflex Holding’s shares fell 31 per cent on Tuesday morning, one day after a scheme of arrangement meeting failed to get approval for the takeover bid from
Macquarie Group
and private equity The Carlyle Group.

Before entering the trading halt on Friday, Redflex traded at $2.61, up 5 per cent from Thursday’s close.

Today, though, shortly after trading began on the Australian stock exchange, Redflex’s shares cratered 81¢, or 31 per cent, to $1.80 by 10.15am. They closed at $1.83, down 30 per cent on the day.

Macquarie, which has built up a 12 per cent stake in the traffic systems and red-light camera company, priced its bid at $2.50 a share when it lobbed it, last June. At the time, the currency was more favourable to Redflex than its current levels above parity with the $US. About 65 per cent of shareholders who attended Monday’s meeting had supported the latest takeover bid.

Monday’s scheme meeting was a painful experience for the majority of
Redflex
shareholders. Fed up with the company’s fractured register, strong personalities and what some say is a history of questionable governance standards, they wanted to accept what they believed to be a fair offer and seek other opportunities.

Instead, the fractured register and strong personalities saw the deal thrown out. Some shareholders at the meeting even brought up the supposedly questionable governance practices of years gone by.

Many shareholders blamed Chris Cooper for ending the deal; the former Redflex chairman, himself only a relatively small shareholder, but with a reach deep into the register.

“People are right to be a little confused as to what is the agenda of Cooper and his associates," one shareholder said after the meeting. “What is he trying to prove?"

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These investors fear Redflex has been backed into a corner with little chance of getting out any time soon. Shareholders had mandated Redflex’s board to sell the company and, after an exhaustive year-long sales process, the board recommended the Carlyle/Macquarie bid.

With that bid now ruled out, shareholders worry there will be no one left to pick up the pieces.

Carlyle indicated it would walk away from the bid if unsuccessful, while others suggested Macquarie would look to offload its stake.

But the former chairman was more upbeat. It is understood that among Cooper’s supporters blocking the deal were wife Elizabeth Geraldine Cooper, who owns an 11.13 per cent stake, the Ho family’s Investaco (6.75 per cent) and Cheng Man Oy (5.81 per cent).

“I’ve been contacted by various other entities that are interested in the business as well," Cooper told Financial Review DealBook.

“The offer that was on the table today [Monday] was a substantially low-ball offer and clearly about 30 per cent of the shareholders agreed with me."

Cooper said the stock was worth at least $3 a share, despite the independent expert Lonergan Edwards & Associate’s valuation of $2.50 to $2.74 at the dollar’s current levels. He criticised the decision to accept a bid when the Australian dollar was at a 30-year high. At 11:40am, the Aussie traded at $US1.079. The $A has appreciated 34 per cent against its US counterpart since last June when the bid was made and when it was valued at $US81¢.

Other shareholders were quick to question Cooper’s valuation methods. The former chairman said his notion of at least $3 a share came from his 10-year involvement with the company, an intimate knowledge of the industry and expressions of interest from other buyers.

“Before he was saying he wouldn’t do something [accept an offer] without a four in front of it," one shareholder said.

“Now he’s saying an offer has to have a three in front of it. The way he is going, and the way the shares could go, pretty soon he will be saying he won’t do anything without a two in front of it."

Redflex chief executive Graham Davie said the board did not have knowledge of these other bidders and the focus would return to running the company under its current ownership.

“There was a lot of pressure on the board to illicit the best possible bid and put it to shareholders," he said.

“We delivered it to shareholders but it appears the shareholder base wasn’t sufficiently supportive to get it over the line. That’s a message for the board that it’s not likely to be accepted by the current shareholder base and so life will go on in its current form.

“It’s the end of the scheme as far as we are concerned. It puts that phase to bed."

If Macquarie did sell its stake, the balance of power could be shifted to what one observer called “Cooper’s half of the registry".

“It’s split about 60/40 at the moment, with Macquarie and the institutional fund managers in control," the observer said. “This could swing if Macquarie sold to Cooper or one of his supporters."

Others were left wondering about Cooper’s ambitions and whether he would make another play for the board. Cooper has not ruled out a return but said that at 58, he was happily enjoying his current lifestyle where he could spend plenty of time travelling and playing golf.